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12th | Accounting Ratio | Question No. 66 To 70 | Ts Grewal Solution 2023-2024

Question 66:

From the following information, calculate:

 

(a)

Proprietary ratio;

 

 

(b)

Debt to equity ratio; and

 

 

(c)

Total assets to debts ratio

 

Current Debt

Capital employed

`18,00,000

`15,00,000

Current Assets

Working Capital

`7,50,000

`1,50,000

Answer;

Proprietary ratio=shareholders’ fund/total asset × 100

Proprietary ratio=3,00,000/21,00,000×100=14.29%

 

Total asset= capital employed + current liability

21,00,000= 15,00,000 + 6,00,000

 

Current liability= current assets - working capital

6,00,000= 7,50,000 -1,50,000

 

Shareholders' fund= capital employed- non-current liabilities

3,00,000= 15,00,000- 12,00,000

 

Debt = total debts- current liabilities

12,00,000 =18,00,000- 6,00,000

 

(b) Debt equity ratio

Debt to equity ratio= debt/equity

Debt to equity ratio =12,00,000/3,00,000

Debt to equity ratio =4/1

 

(c)

Total asset to debt ratio= total asset/ Debt

Total asset to debt ratio=21,00,000/12,00,000

Total asset to debt ratio=1.75:1

 

Interest Coverage Ratio

Question 67:

If Net Profit before Interest and Tax is `10,00,000 and interest on Long-term Funds is  `2,00,000, find Interest Coverage Ratio.

Answer:

Net Profit before Interest and Tax = 10,00,000

Interest = 2,00,000

Interest Coverage Ratio= Net Profit before Interest and Tax/Interest

Interest Coverage Ratio =10,00,000/2,00,000

Interest Coverage Ratio = 5 times

 

Question 68:

From the following information, calculate Interest Coverage Ratio: Profit after Tax  `4,25,000; Tax  `75,000; Interest on Long-term Funds  `1,25,000.

Answer:

Profit before Interest and Tax = Profit after Tax + Tax +Interest

Profit before Interest and Tax = 4,25,000 + 75,000 + 1,25,000

Profit before Interest and Tax = 6,25,000

Interest Coverage Ratio= Net Profit before Interest and Tax/Interest

Interest Coverage Ratio =6,25,000/1,25,000=5 times

Question 69;

From the following detail, calculate Interest Coverage ratio;

Net profit after Tax

`7,00,000

6% Debentures

`20,00,000

Tax Rate 30%

 

Answers;

Interest coverage ratio= net profit before interest and tax/ interest on long term debt

Interest coverage ratio =11,20,000/1,20,000

Interest coverage ratio =9.33

 

Working notes;

 

Wn-1

Net profit after tax=7,00,000

Tax rate 30%

Net profit after tax = 70%

Net profit before tax=7,00,000 × 100/70

Net profit before tax= 10,00,000

 

Wn-2

Interest on loan term borrowings=20,00,000×6/100=1,20,000

Net profit before Interest and tax= 10,00,000+1,20,000=11,20,000

 

Question 70;

From the following information, calculate Interest Coverage ratio;

Net profit after interest and  Tax `1,20,000;  Rate of Income tax;40%; 15%; Debentures `1,00,000;  12% Mortgage loan `1,00,000.

Answers;

Interest coverage ratio = net profit before interest and tax / interest on long term debt

Interest coverage ratio = 2,27,000/ 27,000

Interest coverage ratio = 8.41 times

 

Working notes;

 

Wn-1

Net profit after interest and tax 1,20,000

Rate of income tax 40%

Net profit before tax= 60%

Net profit before tax=1,20,000×100/60=2,00,000

 

Wn-2

Interest on long term borrowings= 27,000

Interest on debenture= 1,00,000 × 15 / 100= 15,000

Interest on 12% Mortgage loan= 1,00,000 ×12 / 100= 12,000

Net profit before interest and tax= 2,00,000+ 27,000 =2,27,000

 

Ts Grewal Solution 2023-2024

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Class 12 / Volume – I

Chapter 3 – Accounting Ratio

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